The Standard Flood Hazard Determination Form (SFHDF) identifies whether a property is located in a special flood hazard area, if the borrower is required to obtain flood insurance, and if federal flood insurance is available. The SFHDF has been designed to facilitate compliance with the flood insurance purchase requirements of the National Flood Insurance Reform Act of 1994. The lender relies on the SFHDF when making, increasing, extending, renewing, or purchasing a loan to determine whether or not flood insurance is required and available on the property.
At the time of processing the loan application, the lender obtains the SFHDF to identify if the property is in a special flood hazard area and if flood insurance is required and available. SFHDF are generated by a Flood Zone Determination Company. If the property is in a special flood hazard area, the lender sends a Notice of Special Flood Hazards and the SFHDF to the borrower advising the borrower to obtain flood insurance. The amount of insurance coverage is based on the combination of loan amount, replacement value of the property, and maximum federal insurance coverage limits. The lender cannot fund and close the loan without receiving the proof of obtaining flood insurance.
Federal Emergency Management Agency (FEMA) maintains and updates flood maps that identify the risk of flooding in a community by assigning flood zone categories to different parts of the map. Flood maps are also known as Flood Insurance Rate Map (FIRM).
Within a flood map, a flood zone denotes the level of risk for flooding in a particular area. Flood zones are assigned codes that denote different levels of risk. The flood zone codes used are A, AO, AH, A1-A30, AE, A99, AR, AR/A, AR/AE, AR/AO, AR/A1-A30, AR/A, V, VE, V1-V30, B, C, X, D. All flood zones beginning with the letter "A" or "V" are considered Special Flood Hazard Areas (SFHAs). If any part of the building or mobile home is within the SFHA, the entire building or mobile home is considered to be in the SFHA. In an SFHA all or a portion of the property has a 1% chance each year of being inundated by flood waters. In the context of mortgages, there is at least a 1 in 4 chance of flooding during a 30-year mortgage.
The current NFIP map may be obtained from FEMA by calling 1-800-358-9616. Scanned copies of the NFIP maps can be viewed on FEMA's Flood Map Service Center (MSC) webpage.
The information in a SFHDF that is of importance to a mortgage transaction is listed below.
Review the SFHDF and verify the following:
If your property is in a special flood hazard area, you may need to provide a copy of completed SFHDF to an insurance agent to obtain federal flood insurance.
Flood determination must be obtained for every loan when making, increasing, extending, renewing, or purchasing a loan. Flood determination should be ordered within the loan processing stage so that the need for a flood insurance can be identified early in the process.
For loan renewals, extensions, or modifications, you may rely on a previous flood determination if the following conditions apply:
Certain additional conditions may apply. Therefore, it is best to obtain guidelines form your legal and/or compliance departments before you start relying on previous SFHDFs.
You need to send a Notice of Special Flood Hazards and Availability of Federal Disaster Relief Assistance to the borrower when a property has been identified to be in a SFHA. When applicable, ensure that after obtaining the SFHDF the loan processor is sending out the required disclosures. Read more about Notice of Special Flood Hazards.
From a compliance perspective, the primary risk is incorrectly identifying that the property is not in a flood zone. To avoid risk of being non-compliance with flood regulations, it is important to have a quality control process where the flood zone determination is verified. This may entail including a step in the QC Checklist, building an automated process, or performing a secondary check to verify flood determination.
As per federal regulations (Regulation H - 12 CFR 2018), you should maintain a copy of the SFHDF for the period of time that you own the loan. Retaining the SFHDF also supports the following:
FEMA periodically revises the version of SDHDF. The current version of the form is the FEMA form 086-0-32 (O.M.B. No. 1660-0040) which expires on May 30, 2015. Until the new form becomes available, you may continue to use the existing form or the previous version of the form. The previous version of the form is FEMA form 81-93, which expired on December 31, 2011.
The fees for flood zone determination may be charged to the borrower only if the flood determination is made or results from:
Federal regulations require that you can only charge a reasonable fee for flood determination. The flood zone determination fee is shown on the Settlement Statement (HUD-1) as part of the 800 series. Within the Good Faith Estimate (GFE), the fees are shown as part of Required services that we select with the segment titled Your Charges for All Other Settlement Services.
Below are certain steps that you can take to verify if the flood determination in SFHDF is correct.
Updated: Mar 21, 2015